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DATE
Tuesday, July 29, 2025 at 8 p.m. ET
CALL PARTICIPANTS
Executive Chairman and Chief Executive Officer — Leonard Fluxman
President, Chief Operating Officer, and Chief Financial Officer — Stephen Lazarus
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TAKEAWAYS
Total Revenue: $240.7 million, up 7% from $224.9 million, setting a quarterly record.
Income from Operations: $22.1 million, up 17% from $18.8 million.
Net Income: $19.9 million, up 27% from $15.8 million.
Adjusted EBITDA: $30.5 million, up 13% from $27.1 million.
Adjusted Net Income: $25.8 million, or $0.25 per diluted share, up from $21.7 million, or $0.20 per diluted share.
Average Guest Spend: Increased 4%, contributing $8.5 million in additional revenue.
Fleet Expansion: Added $3.5 million in revenue; prebooked revenue added $2.7 million; partially offset by a $900,000 decline in land-based spa business.
MediSpa Expansion: Services available on 147 ships, up from 144; next-generation technologies drove over 20% growth for selected treatments.
Prebooking Penetration: Prebooking accounted for 23% of services; recently introduced on Azimara cruises.
Cruise Ship Personnel: 4,365 staff at quarter-end, up from 4,300 at year-end 2024.
Liquidity: $36.2 million in cash and full $50 million revolver available, totaling $86.2 million in liquidity.
Total Debt: $96.2 million at quarter-end, down from $98.6 million at year-end.
Share Repurchase Authorization: $75 million authorization remains fully available.
2025 Guidance: Full-year revenue projected at $950–$970 million; adjusted EBITDA guidance raised to $117–$127 million from $115–$125 million.
AI Initiatives: Piloting AI for yield improvement and operational efficiency; measurable financial impact expected to begin in Q2 2026.
SUMMARY
OneSpaWorld Holdings Limited(OSW 2.21%) emphasized strategic expansion of higher-value services and new health and wellness centers, supporting record financial results. Management reported all operational and financial onboard metrics as "positive and remain positive," with no deterioration in consumer spend during the first half of the year. Cash generation enabled ongoing dividends and investment, while share repurchases are positioned to be opportunistic, and dividend growth is anticipated at the next anniversary.
President, Chief Operating Officer, and Chief Financial Officer Lazarus said, "We have talked about the stock purchases being opportunistic and buying on weakness," clarifying that no buybacks occurred during the quarter due to stock performance and blackout periods.
Lazarus detailed AI integration, including hiring a director, a data scientist, a data architect, an AI business analyst, and a software integration engineer to build internal tools, with impact expected mainly after fiscal 2025.
MediSpa offerings expanded with new Simage FLX and CoolSculpting Elite technologies, generating over 20% growth for targeted treatments.
Executive Chairman and Chief Executive Officer Fluxman described load factors for new cruise line banners Arroya and Mitsui as "still a little challenging, not quite where they need to be," with expectations for improvement as geographic reach broadens.
Fluxman stated, "the precruise passenger generally spends about 30% more than somebody who doesn't prebook," highlighting management's focus on increasing prebooking penetration.
INDUSTRY GLOSSARY
MediSpa: A wellness center service category offering medical aesthetic treatments, such as injectables, IV therapy, and device-based procedures, typically performed by licensed practitioners aboard cruise ships.
Prebooking/precruise booking: Advance reservation and payment for health, wellness, or beauty services before embarkation, often yielding higher per-guest revenue.
Asset-light business model: A strategy emphasizing operational scalability and profitability through minimal ownership of fixed assets, relying on partnerships and service delivery over capital-intensive infrastructure.
Full Conference Call Transcript
Leonard Fluxman, Executive Chairman and Chief Executive Officer, and Stephen Lazarus, President, Chief Operating Officer, and Chief Financial Officer. Leonard will begin with a review of our second quarter 2025 performance and provide an update on our key priorities. Then Stephen will provide more details on the financials and guidance. Following our prepared remarks, we will turn the call over to the operator to begin the question and answer portion of the call. I would now like to turn the call over to Leonard.
Leonard Fluxman: Thank you, Allison. Good morning, and welcome to OneSpaWorld Holdings Limited's Second Quarter 2025 Earnings Conference Call. It's a pleasure to speak to you today to share better than expected second quarter results, which completed a strong first half of the year for our company. Our ongoing strength reflects the efforts of our outstanding team that continues to leverage our powerful global operating platform and our strategic investments to drive innovation, productivity, and profitability across our operations. Highlights of our second quarter were total revenues increased 7% to a record $240.7 million compared to $224.9 million in 2024. Income from operations increased 17% to a record $22.1 million compared to $18.8 million in 2024.
Net income increased 27% to $19.9 million compared to $15.8 million in 2024, and adjusted EBITDA increased 13% to a record $30.5 million compared to $27.1 million in 2024. At quarter end, we operated health and wellness centers on 200 ships with an average ship count of 101 per quarter, compared with a total of 197 ships and an average ship count of 188 at the end of 2024. Also, at the quarter end, we had 4,365 cruise ship personnel on vessels compared with 4,300 cruise ship personnel on vessels at the end of 2024. The quarter marked meaningful progress on our key priorities and I'm going to share some of those highlights with you.
First, we captured highly visible new ship growth with current cruise line partners and added new cruise line partnerships to our fold. We continue to solidify our market leadership during the quarter, renewing our partnership with Windstar Cruises and introducing a new health and wellness center onboard the newly launched Oceana Allura. For the year, we remain on track to introduce health and wellness centers on an additional seven new ship builds, commencing voyages in the second half of the year. Second, we continue to expand higher value services and products. These higher value services, including MediSpa, IV therapy, and acupuncture to name a few, helped to grow sales productivity.
In the quarter, we continued to introduce these services to more ships and expand offerings with the latest innovations adding to our growth. To this end, we continue to elevate the innovation in our MediSpa services with the expansion of our rollout of next-generation technology, with Simage FLX, and CoolSculpting Elite which offer improved results and reduce treatment time by up to 50%. These new technologies generated over 20% growth for these treatments, in Q2 versus last year. In addition, acupuncture remains a sought-after service with very strong adoption of LED light therapy as a high conversion add-on treatment. At quarter end, MediSpa services were available on 147 ships, up from 144 ships at the end of 2024 second quarter.
We continue to expect to have MediSpa offerings on 151 ships this year. Third, we focused on enhancing health and wellness center productivity. This is best reflected in the delivery of across-the-board growth, key operating metrics, including revenue per passenger per day, weekly revenue, precruise revenue, and revenue per staff per day driven by one, staff retention, which remains a key contributor to our consistent gains in operating metrics as experienced team members are driving incremental revenue through more effective customer recommendations. We continue to invest in best-in-class training and have recently redesigned our talent management process to further support productivity and long-term growth in our operating metrics.
Our enhanced sales training continues to fuel increases in the number of guests using the spa, service frequency, service spend, and retail and average spend per guest. Additionally, prebooking revenue as a percentage of services remained strong at 23%. During this quarter, we introduced prebooking on Azimara cruises. We ended the quarter with a very strong balance sheet, which allowed us to invest in our growth while returning value to shareholders through our quarterly dividend payment. We remain confident in our outlook as we begin the second quarter of the year with our business continuing its favorable momentum at the start of the third quarter.
In addition to the introduction of seven new health and wellness centers beginning the voyages through the remainder of 2025, we are also excited by developing and employing emerging AI technologies to enhance our unique global positioning towards delivering increased exceptional experiences for our guests and service to our partners. We believe this along with continued discipline with which we execute our asset-light business model, positions us well to deliver strong results for our stakeholders and shareholders in fiscal 2025 and beyond. As Stephen will share momentarily, we have affirmed our annual revenue guidance and have increased our 2025 adjusted EBITDA guidance.
With that, I will turn the call over to Stephen, who will provide more detail on our second quarter results and guidance.
Stephen Lazarus: Thank you, Leonard. Good morning, everyone. We are indeed pleased with our second quarter performance which saw total revenue increase 7% adjusted EBITDA rise 13% with continued strong and predictable cash flow generation. We continue to expand our innovation, products and services, and leverage our strong operating platform and technology enhancements. Which enabled us to deliver revenue growth at increasing rates of profitability. Additionally, our capital-efficient asset-light business model predictably generates strong free cash flow. Fueling the return of $4.1 million to our shareholders through our quarterly dividend. We are very excited to be making strides in embracing AI with OneSpaWorld Holdings Limited.
We are currently piloting an AI-driven initiative focused on increasing revenue by enhancing yield improvement through machine learning-powered recommendations and algorithmic optimization. And in parallel, we are advancing a second group initiative centered on efficiency and automation using AI to streamline operations, reduce manual effort, and drive scalable process improvements across the organization. Turning now to a review of the quarter. Total revenue increased 7% to $240.7 million compared to $224.9 million for 2024. The increase in service revenue and product revenues were driven by a 4% increase in average guest spend which positively impacted revenue by $8.5 million, a 1% increase in revenue days, and fleet expansion, which contributed $3.5 million.
Contributing to the increased volume and spend was $2.7 million in increased prebooked revenue at our health and wellness centers, included in our ship count as of 06/30/2025. This was partially offset by a $900,000 decrease in our land-based spa business partially due to the closure of hotels where we had previously operated. Cost of services increased $10.4 million attributable to the $12.5 million increase in service revenue and cost of product increased $2.8 million attributable to the $3.3 million increase in product revenue versus prior quarter. Salaries and benefits were $8.8 million compared to $9.2 million in 2024. The decrease was primarily due to a $700,000 decrease in incentive-based compensation expense versus 2024.
Net income was $19.9 million, or net income per diluted share of 19 cents compared to net income of $15.8 million or net income per diluted share of 15 cents for 2024. The change was primarily attributable to a $3.3 million increase in income from operations, and a benefit from an $800,000 decrease in net interest expense. The decrease in interest expense was primarily due to lower debt balances and a lower effective interest rate. Adjusted net income was $25.8 million or adjusted net income per share 25 cents as compared to adjusted net income of $21.7 million or adjusted net income per diluted share of 20 cents for the second quarter of the prior year.
Adjusted EBITDA improved to $30.5 million compared to adjusted EBITDA of $27.1 million in the second quarter of last year. Moving on to the balance sheet, we continue to possess a strong balance sheet at quarter end with total cash of $36.2 million after paying the $4.1 million in support of our quarterly dividend. In addition, we had full availability on our $50 million revolving loan facility, giving us total liquidity of $86.2 million as of quarter end. Total debt net of deferred financing costs was $96.2 million as of quarter end, compared to $98.6 million as of 12/31/2024. Also, at quarter end, we had full availability of our $75 million share repurchase authorization.
We expect a disciplined execution of our growth initiatives and strong cash flow generation driven by our asset-light business model to enable the payment of ongoing quarterly dividends while evaluating opportunities to repurchase our shares under the $75 million authorization and to retire debt. We believe this positions us well to create long-term value for our stakeholders. Turning to guidance. As we look ahead, we are excited about our business and continue to expect total revenue for fiscal 2025 to increase in the high single-digit range, reflecting our strong first-half performance and our positive outlook as well as the addition of seven new health and wellness centers on cruise ships beginning voyages during the second half of this year.
Adjusted EBITDA is now expected to increase by 9% at the midpoint of our guidance as we deliver increased product from our enhanced products and services. Our guidance does not assume a significant deterioration in guest demand. For the fiscal year 2025, we expect total revenue in the range of $950 to $970 million, and adjusted EBITDA is expected in the range of $117 million to $127 million which represents an increase from our previous range for adjusted EBITDA of $115 million to $125 million. For the 2025, we expect total revenue in the range of $255 to $260 million, and adjusted EBITDA is expected in the range of $33 to $35 million.
With that, Andrea, if you could please open the call to questions.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up. If you have further questions, you may reenter the question queue. And our first question comes from Steve Wieczynski of Stifel. Please go ahead.
Steve Wieczynski: So Leonard or Stephen, I want to dig in a little bit more around some of the strategies that sound like they are going to help you enhance your profitability, which sounds like it's very much AI-driven. You know, look. You know, to us, OneSpaWorld Holdings Limited, in terms of the story, was never really about margin enhancement given the revenue share agreements. But it sounds like that now might be changing. So what I'm trying to understand here is, you know, just maybe how material this could be over time in terms of improvement, you know, whether that's, you know, in flow through or margins, whatever you know, whichever way you want to think about it.
Stephen Lazarus: Yeah. Steve, good morning. Let me take that question because I think it's a really, really exciting initiative that we're working on and throughout the organization. There's tremendous optimism. So we break it down broadly into two categories. Right? On the one hand, there is a specific focus on yield improvement and driving revenue onboard through AI, machine learning, algorithmic recommendations, and optimization which we are currently piloting at this proprietary OneSpaWorld Holdings Limited Intellect property that has been built, and the initial results are optimistic, and we hope it will help us expand revenue opportunity onboard but in terms of margin, the opportunity primarily lies below the line in efficiency and automation.
And that is where through a second set of initiatives, we're doing multiple things. We're using GenAI cross-platform automation, for example, email agents, calendar agents, presentation agents, to name a few. Which will drive productivity. They will help us scale our operations without having to add people, and we hope will ultimately lead to increased flow through. There's also GenAI enhanced knowledge work and documentation query some of which is already in place, for example. And so one quick example. Right?
Instead of somebody having to call in and inquire about what their benefits might be or leave policy might be and having to take somebody's time to answer that, the system now will answer that for you literally in one minute. So it's all really good. It's really exciting. We've added five new employees to this project, people that are focused and specialized on this a director, a data scientist, a data architect, an AI business analyst, and a software integration engineer. So people that are super smart and we believe will ultimately help us take a really nice step forward overall in this entire arena.
Steve Wieczynski: So will the brunt of this be kind of seen or, you know, more out into 2026? Is that kind of the way we should think about it?
Stephen Lazarus: Yes. That is the way you should think about it. Exactly.
Steve Wieczynski: Okay. And then second question, just want to ask about the revenue guidance for the year in terms of maintaining that. It seems like spend rates, attachment rates, prebooking, I mean, all seem to be really strong. Through you know, it sounds like in terms of your commentary through July. So, you know, just trying to understand maybe, you know, what kind of keeps you from not raising that range now or at least, you know, even upping the low end of that range. And that's all for me. Thanks, guys.
Stephen Lazarus: Yeah. So we continue to remain very comfortable around where the consumer is at, demand onboard, and how we are progressing from a revenue optimization standpoint. Really, what it comes down to is the introduction of the timing of the new vessels, and the majority of those coming out in the fourth quarter and perhaps, you know, later in the fourth quarter. So that is all it comes down to, Steve. It's just timing of when we expect ships to be coming into service.
Steve Wieczynski: Okay. Fair enough. Thanks, guys. Appreciate it.
Operator: The next question comes from Max Rakhlenko of TD Cowen. Please go ahead.
Max Rakhlenko: Hey. Thanks a lot, guys, and congrats on a really nice second quarter. So my first question is just wanted to dig down a little bit more in terms of what you're seeing in the state of the consumer and the onboard spend. Any changes or leading indicators that you guys normally follow that help inform your view on the state of the consumer and just how that's impacting your outlook for the second half here.
Leonard Fluxman: So I think the way in which we look at it is through the metric lens, Max, and that's basically saying, are our operational metrics and financial metrics onboard continuing to indicate strength in the consumer, not only in terms of demand, but the actual spend itself. And all of those metrics were positive and remain positive, and a lot of the positive spend in the quarter contributed to the over-delivery. So we are not sitting on our laurels here saying that we have the best consumer, but we have a very, very strong consumer onboard. Through the summer season here into the third quarter, which is a transition quarter.
But the quarter's got off to a good start or ending with a sort of a straddle cruise here, but so far, so good. We have not seen any deteriorations for the first six months in consumer spend. So we remain very optimistic about the health of the consumer.
Max Rakhlenko: That's awesome. And then just on capital allocation, so a two-parter. First, how are you thinking about cash deployment on repurchase? And just a framework for us to consider given sort of what we saw in 1Q versus 2Q? And then separately, this is now the fourth quarter since you launched your dividend. So should we assume that it's a growth dividend and we'll see a step up next? Thanks a lot.
Stephen Lazarus: Capital allocation strategies, Max, have not changed. We remain focused in order of precedent on stock buyback, then dividend and debt repurchase. And reiterate that those do not have to be mutually exclusive. We did indeed not buy back any stock in the quarter. Obviously, you're aware of that. We have talked about the stock purchases being opportunistic and buying on weakness. The stock performed really, really well. Cash dropped off a little bit just in the last day or so, but recognizing, obviously, we're in a blackout period. So we will remain opportunistic and repurchase shares as we deem appropriate for the organization and perhaps when there's some softness in the stock.
As it relates to the dividend, yes, you're correct. We have talked about, you know, next quarter would be the anniversary of when it was initiated, and so an increase at that time would be the most opportune timing for us.
Max Rakhlenko: Great. Thanks a lot, guys. Best regards.
Leonard Fluxman: Thanks.
Operator: The next question comes from Tanya Anderson of William Blair. Please go ahead.
Tanya Anderson: Hi. I just wanted to ask a question about the gross margin. It was flat year over year, and I just wanted to know any details on the push and pulls for gross margin for the rest of the year. Thanks.
Stephen Lazarus: Yes. So gross margin as you know, because of the variable cost of our business onboard, is something that slightly is something that we feel comfortable about. But as it relates to the current quarter, nothing really of interest, so to speak. The slight change was really due to a mix of products and services being sold. And then as it relates to the remainder of the year, we remain optimistic about consumer spend onboard, don't anticipate having to do incremental discounting and or promotions. Having said that, though, we don't historically guide specifically on gross margins. We would expect EBITDA margin, though, to improve a little bit as is reflected in some of the numbers.
So see how it plays out, but I think the takeaway should be that we feel good about where things are at and what we foresee for the remainder of the year.
Operator: The next question comes from Gregory Miller of Truist Securities. Please go ahead.
Gregory Miller: Thanks. Good morning. I'd like to first ask about the thermal suites and if you could share some detail on latest trends and spend or behavior. Are you seeing any spend shifts more to the thermal suites of other parts of the wellness operation? Or is thermal suite spend pretty steady? And I'm thinking more from a same vessel comparison not from new vessels or expanded facilities on select ships.
Leonard Fluxman: The thermal suites are definitely continuing to be in high demand. I mean, some of the ships have much larger thermal suites. Clearly, the demand for those thermal suites will change geographically. So Alaska will see a very high utilization just because people like to hang out there and sort of watch the topography as they sit there. But it's also a great way for us to get people into the spa, begin to, you know, promote some services, and extend their time in the spa. So we would love to see thermal suites on some of the banners become a little larger because there's definitely multiuse purposes for the thermal suites.
We can actually do IV therapy whilst they're relaxing. We can do a number of other things whilst they're getting prepared for a particular service. So I would say the demand is steady, but seasonally, you can see a slight shift upwards, particularly with itineraries such as Alaska.
Gregory Miller: Thanks. And shifting to another region of the world, you've had a little more time with Arroya, and I'm curious if you could share any commentary on how that banner is starting to trend or any other expectations you have for either Arroya or as that comes online? In time.
Leonard Fluxman: Yeah. So these are both very early new brands adjusting to market trends and challenges. Arroya, I think, is starting to look at expanding where they're offering the cruises. I think it's been very much UAE focused. I think they need to and the same for Mitsui. I think they're going to go and do more outreach on a global basis and not just specifically within, say, Japan or the UAE. Load factors are still a little challenging, not quite where they need to be. And I think they'll get there. I think once they open the aperture and start selling cruises on a wider basis, I think so too will the load factors improve, but it's early days.
Gregory Miller: Thank you, Leonard.
Leonard Fluxman: Yeah. You're welcome.
Operator: The next question comes from Assia Georgieva of Infinity Research. Please go ahead.
Assia Georgieva: Good morning, guys. Congratulations on a great quarter. I had a couple of questions. We're pretty much caught on occupancy post the industry restart, but yet we are seeing some increases at select brands. How important is occupancy to your revenue generation? I understand that most of those additional passengers may be kids. So probably less important than, you know, making sure that we're back to 100% plus levels of occupancy in general for the cabins. I don't know if that makes sense.
Leonard Fluxman: Yeah. So it does make sense. Your question is accurate. Your own answer is accurate, which means yes. During this time of the year, you do get a lot more kids onboard. So load factors are higher because the kids are all in those additional bunks in single cabins. So we typically have that every single year during the time of the year when people go on vacation. Normalized load factors. But during the third, fourth quarter, they settle back to their yeah, load factors continue to hold very nicely.
Operator: Great. And I think I heard you say that this might not be the best cruise passenger ever, but it's a strong passenger. At this point and no deterioration during the first half of the year. Is that correct?
Leonard Fluxman: No. Let me clarify. What I'm saying is we have a good passenger onboard. We certainly see across 200 ships. Clearly, that's a lot of different passengers. And on some ships, you know, it's not your best, but they're still good. So you gotta use your marketing toolkit a lot more and you gotta be a little bit more outward on your offerings. And so, yeah, on certain of the vessels, it's still a very, very good passenger, but there are stronger passengers on some of the ships, but that's normal. So I'm not saying anything other than the fact that there's a very good consumer onboard across all the ships.
Operator: And the more challenging ones, would those be kind of further down market? Is there any sort of way to summarize where you're seeing the need for more marketing?
Leonard Fluxman: I think it, you know, it depends on the itinerary geography. It also depends on the age of the ship or the facilities, etcetera. So all of those typically are challenges. You know, your best passengers go into fewer ships and other ships are slightly more discounted, so they go on those. So I think, you know, a plethora of opportunity for a guest to pick where they want to be and, you know, how much they want to pay for their trip. So I don't think this is anything different to what we've seen historically. And it falls in line with, you know, new ships come out. They're going to the best itineraries. Best passengers, obviously.
So you know, it's a domino effect where we see best ships coming out and they price the highest, but that's normal. Nothing changes.
Operator: Great. And can I ask a second question? With regard to AI? So I understand it's a below the line help, if you will, on the cost side. And with some of the EBITDA margin expansion for the back half of the year, related to these efforts? Or it's too soon to see that? And as part of that, Okay. Thank you. No. No. No. So
Stephen Lazarus: AI will not impact either the revenue opportunities that Steven spoke about or cost efficiencies that he clarified as well. We expect that to probably have an or start having some kind of an impact that we can measure beginning, I would say, almost the second quarter of next year once we fully rolled out a couple of other initiatives. So we're really in a testing phase right now.
Operator: Alright. Okay. This makes sense. Is there any logic to try to apply AI tools to the precruise to expanding the precruise portion of the business? Or is that more not an issue, but working with the cruise lines in terms of embedding the precruise booking opportunity within their own precruise engines.
Leonard Fluxman: Okay. I think there's always opportunity to improve precruise whether we utilize AI or we can get the cruise lines to focus more resources on it. It's a work in progress, I would say, right now. I think there's real opportunity on some of the banners where we're not perhaps quite up to the 23%. So I think our teams are working closely with them. To the extent we can get them to incorporate new thinking around AI, we'd love to do that. But the adoption rate's pretty slow.
So we go to the meetings, on a quarterly basis, we show them where the opportunity is, and we follow through and see if some of them adopt and some of them don't. So it's one of the number one items. I think they're focused on it. Not only in terms of other prepaid opportunities onboard, but for us, it's super important to continue to try and get that metric a little higher over time.
Operator: Sure. Yeah. Last question, could you remind us what sort of a multiple you get for every dollar spent precruise? I think for the industry to generally tune a half times more spend if they book precruise.
Leonard Fluxman: Houses generally the precruise passenger generally spends about 30% more than somebody who doesn't prebook.
Operator: Great. Great. Thank you so much, Leonard. And thank you, Stephen. This concludes our question and answer session. I'd like to turn the call over to Leonard Fluxman for any closing remarks.
Leonard Fluxman: Right. Thank you, Andrea. Thanks again for joining us today all. Look forward to speaking with many of you at our upcoming investor meetings and when we report our third quarter results in October. Thanks for joining today.
Operator: Bye. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.